The assumptions of the “unpredictability defense” are flawed

Last month, we discussed the so-called unpredictability defense, which posits that major pieces of corporate litigation and major corporate transactions are so distinctive and so unpredictable that the concepts of advance budgeting and legal project management (LPM) don’t translate well in these contexts and that law firms can’t properly anticipate the cost of their services.

This attitude, which has been pervasive among law firm partners for many years, puts in-house counsel in conflict with senior company management, who are accustomed to employing budgeting and project management in nearly every other area of corporate spending. In-house counsel have been asked to embrace LPM and assume greater responsibility for managing the company's legal spend and to find outside counsel who are willing to master and apply LPM in the handling of the client's matters and to assume responsibility for delivering the right results "on budget.”

But the assumptions of the “unpredictability defense” are actually flawed, and LPM is actually adaptable by any major law firm and any law department to high-stakes litigation and major corporate deals.

Litigation has been repeatedly studied and reduced to its component phases over the last couple of decades, providing litigators and in-house counsel with the basic framework that they need to develop reasonably accurate budgetary forecasts and to track budget-to-actual expense on a real time basis, both of which are hallmarks of LPM.

The phases and tasks found in the American Bar Association’s (ABA) Uniform Task Based Management System (UTBMS) break down most litigation to a predictable pattern: investigation, pleadings and motions, discovery, trial and appeal. Nearly every type of case follows this predictable pattern, whether it involves financial irregularity, fraud or conspiracy; alleged violation of federal or state statutes; a failed merger or acquisition; breach of warranty or other commercial dispute; a toxic tort or product liability action; and so on. Each piece of litigation is simply not as unusual and unique as many people seem to think, or it can be broken into discrete phases that can be analyzed further for budgetary purposes.

Although many transactional lawyers may not be accustomed to phase/task coding, there are companion ABA Code Sets for various types of transactional matters. These relate to strategizing about the transaction, document preparation, negotiation, preparation for closing, and other tasks that are common to many transactions.

More important, today's law firm time and billing systems are quite flexible, allowing outside counsel to customize phase/task code sets for all types of client work, both litigation and transactional, and to mine their data to provide increasingly sophisticated and reliable budgets. Thus, even if counsel does not find the ABA task codes fully applicable, he or she is not limited to that set of codes, and they can be customized for a particular client or engagement.

As Nathan Bowie, a leading law firm consultant, wrote in Metropolitan Corporate Counsel in September 2012, “Firms are utilizing previous matter history and/or precise matter templates to create very accurate plans for the complete lifetime of a matter, and as a result, very accurate and predictable budgets. . . . A thorough matter plan provides GCs with transparency throughout the lifetime of the matter. They know with certainty what activities will be undertaken during a specific timeframe and the expected run rate for that period.”

Woldow thoroughly rejects the “unpredictability defense” for litigation matters, and we agree. In the early 1990s members of our firm participated in the work of the ABA group that developed the UTMBS litigation phase/task coding system. When several of the firm’s larger clients encouraged us to embrace the concept of tracking time and cost by litigation phase and task, we implemented the system across several large client-work groups. Years later, we and our clients are the beneficiaries of a robust data set that we use to provide estimates, forecasts and budgets for the different phase of a range of matters.

Contributing Author

Samuel Goldblatt

Samuel Goldblatt is a Boston-based litigation partner at Nixon Peabody who represents domestic and foreign companies in a wide variety of cases, including commercial cases,...